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Key Facts

  • Project Start: Feb 15 2008
  • Project End: Feb 14 2010
  • Coordinator: German Institute for Economic Research (DIW Berlin)
  • EU Contribution:
    998 170 EUR

    • // FINESS Flyer

    Upcoming Events

  • May 10-11 2010, Brussels: International Policy Conference

    • // Programme

    Recent Events

  • April 26 2010, Berlin: Advisory and Steering Committee Meeting

  • January 2010: 4th Steering Group Meeting

  • Sept 14 2009, Berlin: 3rd Steering Group Meeting

  • March 5-6 2009, Berlin: International Scientific Conference

  • March 6 2009, Berlin: 2nd Steering Group and Advisory Committee Meeting

  • Sept 8 2008, Berlin: 1st Steering Group Meeting

  • Feb 22 2008, Berlin: Kick-off Meeting

    • Consortium

    Project Structure

    WP7: FINANCIAL MARKET INTEGRATION AND POLICY EFFICIENCY

    Objectives

    Obtaining relevant conclusions for the optimal design of economic policy:

  • Analysis of money demand in integrated financial markets to properly address the course of inflation in the euro area.
  • Determination of impact of institutions and regulations of mortgage markets on the transmission of monetary policy to house prices and consumption.
  • Assessment of the role of labour and credit market frictions and their interactions for the course of European unemployment.

    • Work description

  • Money demand in integrated financial markets
     Determinants of money demand under a changing institutional environment. Exploring the role of financial markets (stocks, bonds, derivatives) to explain possible instabilities in the euro area money demand. Extension of relationship by financial variables.
  • Mortgage markets and transmission of monetary policy
     Specification of VAR models for the impact of monetary policy shocks on consumption and house prices. Testing whether institutional characteristics of mortgage markets, such as the interest rate structure or the mortgage repayment rate provide an explanation for such heterogeneity. VAR models include block exogenous area-wide variables (real GDP, the price level, short-term nominal interest rate as a proxy for the policy instrument), and the real effective exchange rate. Country-specific variables include real house prices, real private consumption and the mortgage lending rate. Development of DSGE model for the open economy to understand the functioning of mortgage markets.
  • Credit market frictions and unemployment
    Analysis of frictions in credit markets and their interactions with labour market rigidities for the transmission of macroeconomic shocks and monetary policy. We will explore whether and to what extent frictions in credit markets cause the different unemployment experience across countries. Development of DSGE model with labour market rigidities to study the implications of different degrees of credit market frictions.
  • Importance of multinationals in the transmission of financial shocks
    The role of firms in the transmission of shocks is poorly understood. Using firm data for a number of European countries we examine the importance of multinational firms in the transmission of financial shocks across countries.
  • Policy conclusions
     Deriving implications for the design of optimal policy.

    • Workpackage Leaders: Timo Wollmershaeuser, Christian Dreger

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